Xcel requests $285 million rate hike for 2013

Xcel Energy is asking state regulators for a $285 million, or 11 percent, rate increase next year, saying most of it is needed for continued operations at its two Minnesota nuclear power plants and to upgrade its power grid.

But the company also has seen customer demand drop since 2010, and that could spell trouble in the future.

"While growth typically reduces the size of a rate increase, the company's filing notes that that's not the case now," noted Judy Proferl, Xcel president and chief executive of its Northern States Power Co.-Minnesota unit.

The company expects demand growth to resume, but it could be at an anemic 0.3 percent per year compared with the 2 percent annual rate it enjoyed in the previous decade, Xcel regional vice president Laura McCarten said.

Minneapolis-based Xcel, which serves 1.2 million electricity customers throughout the state, filed its request with the Public Utilities Commission on Friday, Nov. 2.

The proposed rate hike would increase the average residential customer's monthly bill by about 12 percent, or about $9, Xcel estimated.

The commission is not expected to make a final decision until next fall or winter.

In the meantime, Xcel is asking the PUC to impose an interim rate increase starting in January that would raise monthly residential bills by 10 percent, or about $8 a month for the average household.

Xcel says it needs about $114 million -- about 40 percent of the proposed increase -- to continue to operate its Monticello and Prairie Island nuclear power plants.

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Earlier this week, the utility told the PUC it no longer wants to go forward with a $240 million plan to increase the power output at Prairie Island, located near Red Wing; that project is not part of the proposed rate increase.

However, the rate proposal does include money to pay for a 70-megawatt increase expected this spring at the 600-megawatt Monticello plant, said Chris Clark, Xcel's regional vice president of rates and regulatory affairs.

Most of the $114 million will pay for upgrades so Xcel's 40-year-old nuclear plants can operate for another 20 years, Clark said.

Xcel told the state it needs about $56 million, or 20 percent of the proposed increase, to pay for upgrades to its electrical grid, including both high-voltage transmission and lower voltage distribution lines typically found in cities.

Some of that money will be used to pay for the high-voltage CapX2020 transmission lines approved by Minnesota and Wisconsin regulators, Clark said.

Xcel wants $40 million, or about 14 percent of the proposed hike, to reimburse it for higher property taxes that arrived after the Legislature changed the state's property tax structure, McCarten said.

Finally, Xcel is asking ratepayers for $75 million, or about 26 percent of the increase, to account for lower electricity usage. The utility has projected that customer usage will be 4 percent less in 2013 than this year, McCarten said.

The utility lost a pair of high-consumption Minnesota customers when the Verso Paper Corp. decided not to reopen its plant in Sartell after a fire this summer and the Ford truck plant in St. Paul shut its doors for good in December, she said.